Homes in Milwaukee’s poorest areas often can be bought for as little as $8,000, with rents running upwards of $500 a month. In virtually no time, landlords can own the properties free and clear and the rent they collect is pure profit — as long as they can collect. As succinctly put by one of the landlords featured in the book, an African-American woman named “Sherrena,” (pseudonyms are used throughout the book) “The ‘hood is good.”

This furthers the misperception that landlording is a “get rich quick” scheme. Sherrena made statements to Desmond that sent up red flags, at least to us in the industry, that she was already in the throes of failure at the time of the interviews.

Attorney Heiner Giese did the research to discover Sherrena’s identity. She was not becoming wealthy on these properties. Instead, Sherrena began losing her buildings to foreclosure shortly after the Desmond interviews and was out of business well before the book was published. Many of her properties have since been razed.

However, Schneider does recognize a fact that is missed by many who look at rental housing and urban issues from the outside

Further, despite the book’s grim portrayal of landlords, one can only imagine how far these neighborhoods could fall if landlords weren’t there to keep at least some semblance of order. If housing laws were to squeeze the amount of money property owners could make on their rental units, they may simply abandon these homes altogether, leaving a lawless landscape devoid of structure.

The Journal editorial echoes Desmond’s advocating for legal representation for tenants in most evictions. If you frequent eviction court you seldom see a day without Legal Action representing tenants. ATCP 134 provides enticement for attorneys to represent tenants tenants tin cases where the owner is doing wrong.

Implying tenants need legal representation simply perpetuates a myth that wrongful evictions are common and owners somehow benefits from an eviction. In fact by the time it is over the owner has lost two to three months rent and often more. Legal representation for tenants in evictions seldom does more than simply let the tenant get another month of nonpayment before leaving.

In an average month eviction judgments in Milwaukee County exceed $847,000 – every month. But this is but a fraction of the losses suffered by property owners. Of those evictions, only a third of the cases had money judgments other than the court applied fees. Was this because the tenant did not owe rent? No, more likely because the owner did not want to waste more time chasing a judgment they will never collect. Those in our industry as well as those outside of the rental business will tell you that less than a quarter of uncollected rent ends up in eviction court.

This is money removed from housing and increases costs for the rest of the tenant population. While some tenants may use the money for real needs like shoes for kids, some use it for other things that further harm the community.

Then there is the comments about constructive (illegal) evictions. While statements like this flame the fires of hatred against landlords, such acts seldom occur and when they do there is adequate remedies for the tenant. I own two duplexes that a guy walked away from his 1/3 down and eight years of payments after he spent a weekend in jail because he threw the tenants’ belongings out on the front yard and changed the locks. Seems the tenant did not pay rent and when he went to find out why, he also found they broke the front picture window. His first stop after getting out of jail was my office to see if I would buy them for the remaining mortgage. Small owners take these things too personally…

Desmond’s book has brought the issue to the forefront. And this is good. Its is our industry’s job to make sure this does not turn from what it is, the bringing a real problem to light, into yet another excuse to bash the rental housing industry.

The part of the discussion that would be helpful to the overall community is increased housing vouchers. Universal food stamps for people in need was a good first step many years ago. Housing and utilities vouchers for those who need them the most would be a good next step.

I was having breakfast with a friend familiar with landlord issues and we were agreeing that in this business, our tenants are our customers, low vacancy rates are cyclical, and things always change.

“The enemy of my customer is my enemy”. The issues that conflict with my customer buying more product are issues that I need to be concerned about.

In the rental housing industry the issues that cause my tenant to not pay rent, are my issues too. We are joined at the hip. To think otherwise is foolish.

I have thought about this often from a political perspective.

Why are the Democrats typically the political polar opposite to providers of lower cost housing and the Republicans often more supportive of our issues? Every proposal that increases costs or decreases competition in that market adversely impacts the lower income residents, a constituency the the Dems purport to be theirs. If you think about it the Dems should be the allies of rental housing.

A decade or so ago I hired former Governor Schreiber to represent the Association at the statehouse. More than a few people thought I lost my mind. But it was a good choice as he understood the dynamics of the market and could explain to other Democrats how our bill was good for the lower income families. We succeeded with a major piece of legislation at a time that even Green Bay Packer stadium financing was at a stalemate.

I extracted the data from the 28,835 Milwaukee Countyevictioncases between 1/1/13 and 2/28/15.

Landlords who went to court lost $22,677,299.01 in these 26 months.

Remember this was only Milwaukee County And only a small fraction of cases end up in court or are pursued to a money judgment. Most owners I’ve spoken to tell me that less than a quarter of their non paying tenants end up in eviction court.

Some sad facts:

Only half the cases resulted in a money judgment against the tenant (14,424 of the 28,835)

This past week, taking advantage of the moderate weather, we began our annual exterior survey of our properties a bit earlier than normal. We walk around the exteriors of all the properties to set a prioritized project list for spring/summer 2015.

The neighborhoods we operate in are the near Southside, from just north of National to Cleveland, 1st to 36th.

While the primary focus is reviewing our properties, we also get a good sense of what is happening generally in the neighborhoods.

If this was a rock band I would have called this the “Fresh Mud and New Green Board Tour” It was absolutely surprising how many properties have been bulldozed and how many more properties are boarded and abandoned since doing the fall review in Sept/Oct of last year.

Anyone who tells you the real estate market on the near Southside has or is rebounding from the 2008 housing bubble hasn’t been out much. 😉 I wrote about what I was seeing in the past and again here. It is much worse now.

Many of the new board ups are nice looking properties. However as they accumulate city “reinspection fees” and fines they get to the point they cannot be sold and languish until they are stripped of all value, foreclosed upon by the city for taxes and ultimately razed.

But at least the city was able to tack some fees on it. Fees that they never collected because when the City becomes the owner the only thing left to do was bulldoze them. (The one pictured in the link is now a mud lot). Many of these are Zombie Houses

We are seeing sale prices in Milwaukee that make Detroit almost look like a healthy market.

Disclaimer

I am "just a landlord," NOT an attorney or accountant. If you need legal advice, tax advice or have appendicitis, don’t rely on something you read on the internet and do it yourself. Rather, hire a competent professional.